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4.40 pm
Mr. Peter Luff (Mid-Worcestershire): I apologise to the House and the Minister of State—perhaps the Under-Secretary will pass this on—for missing the larger part of his opening remarks. I was lunching with the Prime Minister of Mongolia at the time, and I promised him that I would put on record the appreciation of the House and the Government of Mongolia's significant contribution to the peacekeeping operations in Iraq. I had not been aware that armed forces from Mongolia were serving there. That just shows how wide the coalition in Iraq is.
I speak primarily for two reasons: first, a constituency interest in rocket propulsion systems—this is one speech that really will be rocket science—and, secondly, a two-year attachment to the armed forces parliamentary scheme in the Royal Navy.
First, I wish to make a relatively less strategic point about the procurement process, which has obviously begun to get a great deal better since the establishment of the Defence Procurement Agency. We can have much confidence that the systems now used are a great improvement on what went before. One of the education reforms that the Conservative party introduced was the local management of schools, which devolved to schools some procurement decisions to which they previously did not have access. Large budgets went directly to them to spend as they thought best, rather than being handed down through some remote procurement organisation. Having spent some time with the Royal Navy, I think that the local management of ships might offer a similar advantage to the Royal Navy. Many procurement decisions might be better made at local chandlers shops where large quantities of cheaper kit could be found, rather than by using the more cumbersome procedures that are still forced on the Navy, even for small items.
No doubt the DPA is doing a good job; it needs to, because it is Britain's single biggest purchaser of manufactured goods, which sets the debate in a clear context. The DPA freely admits on its website that it has made mistakes, and it thinks that it has learned from them. It thinks that it has
- "begun to deliver equipment to the Armed Forces 'faster, cheaper and better.'"
- "The aim of defence procurement is to buy equipment for the Armed Forces that meets their requirements and timescales, while achieving the best value for money for taxpayers."
I note that, in the evidence to the Defence Committee, on page 114, the Defence Manufacturers Association, in referring to the impact of the policy on small and medium-sized enterprises, said:
- "Prime contractors are put under great budgetary pressures by the MOD, operate globally and will seek systems and sub-systems from wherever in the world they can be procured most cheaply for the benefit of the project in hand."
When I went to Abbey Wood to see the work of the DPA as part of the armed forces parliamentary scheme, I was given a particularly detailed brief on the procurement of the new Type 45 destroyer—an extremely important procurement for the Royal Navy that, in concert with the planned future aircraft carrier, to which I shall address some remarks later, will form the backbone of the Royal Navy's air defences for the foreseeable future. Six ships are currently on contract with BAE Systems. Of course, construction of those ships has begun. They are expensive bits of kit. The contract roughly averages out at about £1 billion per ship, so they are hardly inconsequential items. There is no doubt that they are a great advance on anything that the Royal Navy has at present and that their procurement is greatly to be welcomed. Incidentally, on residential requirements for our armed services, which was mentioned by the hon. Member for Alyn and Deeside (Mark Tami), those ships certainly represent a quantum leap in the conditions for all the officers and ratings on board. The cabins and messes are modelled on those designed for cross-channel ferries, which is a stark contrast with the conditions that I have seen on Type 23 frigates, for example. That is to be welcomed.
There is a nagging doubt, however. The Government have not made clear what their final commitment to the Type 45 is. A class of up to 12 ships is always talked about—"up to" is the magic phrase. Can the Minister further clarify whether that is an aspiration or a firm target? The commitment is to six, but I believe that the Royal Navy needs all 12. I hope that the Minister will reassure us that the pressures on the defence budget will not lead to a reduction in that aspiration for a class of up to 12 ships.
I share the concerns expressed by my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) that there are only two carriers in the future programme. It seems to me that three is the absolute minimum to provide an effective defence platform, as he explained in his fine speech. I appreciate that there is tension in relation to the size, cost and availability of the proposed carrier. I share his view that three would be preferable, but I am reluctant to advocate a downsizing of the ship itself. I would therefore be interested to hear the Minister's comments about the adequacy of that procurement.
The carriers will use the short take-off and vertical landing version of the joint strike fighter. A variant of that fighter with conventional take-off exists, and as my hon. Friend said, we could consider using catapults and wires to retain those aircraft on board. There is concern that the joint strike fighter is overweight, late and over-budget, which could have serious implications for the carrier programme, too. Does the Minister share those concerns?
A lot of doubt surrounded the alliance approach that has been established to procure the carriers. Is the Minister confident that the Ministry can manage the project? Concern has been expressed, as is often the case in public procurement projects in which the private sector is involved, that the Ministry wants to control the project but not to bear a share in the risk that flows from that control. If it wants to control and own, it must share risk, too. There is real concern that that is not happening at present.
I have an interest in the Eurofighter Typhoon procurement, too, not least because Roxel in my constituency will make the motors for the ejection seats, which we always hope will never be used but are a crucial part of the aircraft. I echo all the questions asked by my right hon. Friend the Member for Fylde (Mr. Jack) during his excellent speech. Can the Minister confirm that deliveries will be completed as planned? I think that 50 per cent. of tranche 1 should have been delivered by now. Has that happened? Will the weapons system for tranche 1 be available at the end of 2005? In particular—this is the crucial question—can the Minister say anything clear about tranche 2? We saw the reports in the Financial Times on Monday that called into doubt our commitment to tranche 2, making the clear point that
- "Orders for tranche two must be placed by the year end to avoid a costly production gap."
Generally, British Governments have not been as good at protecting our defence industrial base as those of other countries—our competitors. When I used to advise a number of defence companies in my happy days in the private sector, the complaint was always how much better the French were at looking after their manufacturers than the British. They would pick winners—which company could bid for which international project—while British companies fought each other to the death, letting someone else through.
I accept that there is a need to reconcile competition in the industry with the strategic interests of protecting certain skills and abilities within the United Kingdom. That is not helped when we have dramatic swings in procurement expenditure, which is a matter of great concern at present. I saw an article in the Bristol Evening Post in September—who are we to argue with the Bristol Evening Post?—quoting Paul Beaver, a former spokesman for Jane's Defence Weekly. He made the observation, towards which I am very sympathetic, that the Ministry of Defence was being forced to make savings to offset its commitments elsewhere and in engagements around the world on the current budget. I fear that that unplanned escalation of British military commitments is adversely affecting the need to plan a properly costed and consistent defence procurement
policy. That is a matter of much concern. What worried me greatly was Mr. Beaver's hypothesis that the Royal Navy was likely to bear the brunt of costs with a reduction in the number of Type 45s and nuclear-powered submarines. I have to say that that was compounded by a spokesman for the Defence Procurement Agency who said in response:
- "However, we do recognise that even though funding for defence has increased year on year since the last spending review, future funding remains taut given the range of operational tasks our armed forces have been involved in."
Virtually every hon. Member who has spoken has rightly paid a lot of attention to US policy. That cannot be reiterated too often because although America is our ally and we are proud to have a strong and continuing alliance with it, there is sometimes a bit of a one-way street. It is important to get movement on the waiver on the international traffic in arms regulations. The provision represents closet protectionism because it means that British defence contractors do not get the necessary information to allow them to bid in good time for Pentagon projects. We need the waiver so that the bidding process becomes fairer and more open. I think that the Government share that view.
The Government are also worried about the "Buy America" provision in the new American defence Bill. I shall not labour this point because other hon. Members have made it, but it is crucial that the provision is resisted. I am confident—I hope that my confidence is not misplaced—that the President would veto such a proposal, and I think that the two Houses of Congress have a difference of opinion anyhow, so perhaps we should not worry unduly about the specific proposal. However, the situation highlights our continuing worry that, although America often preaches free enterprise to the world, it does not always practice it with the same enthusiasm in its practical day-to-day decision making.
That leads me on to a point about offset, which is hugely important given the dominance of American manufacturing in the defence world these days. In a written answer on 14 March, the Minister of State said that the total value of industrial participation obligations
- "is £5.4 billion of which £2.3 billion remains to be completed".—[Official Report, 14 March 2003; Vol. 401, c. 432W.]
That situation contrasts greatly with the US Department of Commerce's attempt to keep its population informed by publishing its report to Congress on offsets in defence trade. The British Government do not publish a comparable report. Perhaps they will consider doing that because we need confidence that offset arrangements are negotiated toughly and properly enforced.
Such confidence is important for Roxel in my constituency, which is a manufacturer, designer and developer of rocket motors and rocket propulsion systems. It was once part of Royal Ordnance but is now
jointly owned by a bewildering array of European shareholders. It is the third largest producer of rocket propulsion in the world and it employs some 350 people in my constituency and that of the hon. Member for Wyre Forest (Dr. Taylor).I am grateful for a helpful letter that I received from Lord Bach—it has been a theme of the debate to pay compliments to him, which I do happily. There has been a great deal of pain in Summerfield and Roxel during recent years and the industry has been in a steady state of consolidation due to domestic and international pressures. Overseas procurement by the Ministry of Defence has not helped. Hellfire missiles for the UK attack helicopter used the US rocket motor, as did the Meteor programmes for Eurofighter Typhoon. Guided multiple launch rocket system procurement has no UK propulsion offset. A further great worry is the fact that investment in rocket propulsion is running at less than 10 per cent. of historical levels, which puts real, dramatic pressures on the industry. Other nations, especially the US, are giving much more support than the UK to their rocket propulsion contractors.
Roxel has an order backlog for a few years, which is encouraging, but a lot of cliff edges will appear by 2007–08. The Government need to take a serious view of that because rocket propulsion is a crucial aspect of many of our defence projects. There has been good news because a three-year propulsion research contract has been awarded for 2003 and a technical demonstrator programme for large diameter insensitive munitions, which is exciting technology, has been awarded. There has also been an award for an extended range guided multiple launch rocket system—ER-GMLRS—which includes a propulsion element.
Although good news exists, the historical levels of research have been slashed considerably and there are many cliff edges in procurement. If the Government are serious about protecting specific key skills—working on such technology is a highly skilled job—they must think what more they can do to safeguard the industry. The company recognises that there is a general need to review and realign defence spending because the world has changed, but hopes that that will lead to a greater focus on ensuring that there is support for the UK defence industry, and especially propulsion, with offset arrangements and research funding.
UK missile propulsion technology must be sustained. We have lost the last indigenous manufacturer of gun propellants. Missile propulsion technology is one of the essential skills and assets in this country. We need to protect it carefully.
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